Flipkart's Valuation Witnesses Rs 41,000 Crore Dip Over Two-Year Period| KNOW WHY

E-commerce behemoth Flipkart, under Walmart's umbrella, witnesses a staggering Rs 41,000 crore ($5 billion) plunge in valuation over two years. The downturn is linked to the demerger of the fintech arm PhonePe. Despite a dispute from Flipkart, estimates place its valuation at $38-40 billion, with PhonePe valued at $12 billion.

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In a significant turn of events, Flipkart, a leading e-commerce player, has seen a substantial dip in valuation, losing a whopping Rs 41,000 crore ($5 billion) over two years, until January 2024. This valuation nosedive has raised eyebrows and instigated a deeper probe into the factors driving this downward trend.

According to equity transactions conducted by Walmart, Flipkart's parent company based in the United States, the firm's valuation plummeted from $40 billion in the fiscal year ending January 31, 2022, to $35 billion by January 31, 2024. This substantial decrease in valuation has sent shockwaves through the industry and among investors.

The primary reason behind this decline is attributed to the demerger of PhonePe, Flipkart's fintech subsidiary, into a separate entity under the Walmart umbrella. In the fiscal year 2022, Walmart diluted 8 percent equity in Flipkart, reflecting the earlier $40 billion valuation. However, in 2024, Walmart increased its shareholding by 10 percent, amounting to $3.5 billion, which pegged Flipkart's valuation at $35 billion.

Despite Walmart's assessment, Flipkart has contested this valuation drop, labeling it as a "suitable adjustment" post-PhonePe's separation in 2023. A Flipkart spokesperson clarified that PhonePe's demerger necessitated a recalibration in Flipkart's valuation, which wasn't adequately reflected in Walmart's reports.

However, amidst this valuation turmoil, Flipkart's organic valuation reportedly remains steady, estimated between $38-40 billion. PhonePe, post its separation, boasts a valuation of $12 billion after securing investments from prominent firms like General Atlantic, Tiger Global, Ribbit Capital, and TVS Capital Funds.

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Flipkart's robust performance in terms of Gross Merchandise Value (GMV) growth of 25-28 percent year-over-year in 2023, ranging between $29-30 billion, is believed to have bolstered its valuation. It's noteworthy that the last valuation exercise was conducted in 2021, inclusive of PhonePe's valuation.

Despite posting a net loss of Rs 4,846 crore and a consolidated net total income of Rs 56,012.8 crore in FY2023, Flipkart's financial instability might dent investor confidence and affect its market perception, necessitating strategic maneuvers to regain lost ground.